# Bank Audit: Types of Banks and Role of RBI
## Types of Banks in India
| Type | Nature & Purpose |
|---|---|
| Commercial Banks | Most widespread. Main functions: accepting deposits & granting advances. |
| Regional Rural Banks (RRBs) | Set up in rural areas to cater to basic banking & financial needs of rural communities. |
| Co-operative Banks | Function like Commercial Banks but set up on Co-operative Principles; registered under Co-operative Societies Act; cater mainly to agricultural & rural sectors. |
| Payments Banks | Recent. Accept restricted deposits; cannot issue loans or credit cards. Customers can open Current/Savings a/c, get Debit cards, Internet/Mobile banking. |
| Development Banks | Conceptualized to provide funds for infrastructure facilities important for economic growth. |
| Small Finance Banks | Set up by RBI to make basic financial/banking facilities available to unserved/unorganised sectors (small marginal farmers, small & micro business units, etc.) |
## Reserve Bank of India (RBI) — The Regulator
Functioning of the banking industry in India is regulated by RBI which acts as Central Bank of India. RBI is responsible for:
- Development and supervision of the Indian financial system.
- Determining, along with the Central Government (CG), the monetary and credit policies.
- Regulating activities of commercial and other banks.
### Important Functions of RBI
1. Issuance of currency
2. Regulation of currency issue
3. Acting as banker to the Central Govt (CG) and State Govts (SG)
4. Acting as banker to commercial and other types of banks
### RBI's Authority Over Banks
- No bank can commence the business of banking or open new branches without obtaining a license from RBI.
- RBI has the power to inspect any bank.
- Banking operations are conducted only at branches (this drives the branch-audit structure).
## Peculiarities of Banking Operations (Audit-Relevant)
These peculiarities directly shape audit risk and approach:
1. Huge volumes and complexity of transactions.
2. Wide geographical spread of banks' networks.
3. Large range of products and services offered.
4. Extensive use of technology.
5. Strict vigilance by the banking regulator (RBI).